Loading summary
Transcript42 lines
- [00:02]
Kyle Rysdal
Forget the Fed, forget Congress and the White House. You know who's really in charge of this economy? You. From American Public Media, this is Marketplace in Los Angeles. I'm Kyle Rysdal. It is Thursday, Thursday today, the 16th day of January. Good as always to have you along, everybody. Let us pause for a moment here right at the top of the program, shall we, to say a collective thank you to the sometimes fickle, often irascible, but amazingly dependable American consumer. Once again, we learned from the Commerce Department this morning, consumers are driving this economy. Overall, sales at stores and car dealerships and gas stations and E Commerce sites were up 4. 10% in December. November. November's data was revised up to 0.8%. Rounding out a pretty nice holiday season. Thank you very much. Compared to a year ago, we were spending more on cars and furniture and electronics. To be sure, inflation is still a thing and consumers remain not in the greatest of moods. So we asked Marketplace's Mitchell Hartman to find out what's providing the oomph to keep spending up.
- [01:23]
Mitchell Hartman
For all the worry through the fall about political uncertainty and inflation and interest rates, plus labor strikes and hurricanes, economist Kathy Bostjancik at Nationwide says consumers continue to spend at a buoyant pace, wrapping up the holiday season and capping off the year. The consumer is really settling into a pretty stable space. Robert Frick at Navy Federal Credit Union says spending in December was up nearly across the board. We bought more clothes, sporting goods, cars and furniture, durable goods. The price of those literally is coming down now. That includes electronics. The fact people are spending more on those things just makes perfect sense now. Not all increases in consumer spending are an economic good. One of the biggest jumps in December was at gas stations. One reason, says Andrew Gross at aaa, colder winter, much colder than we've seen the past few years. That puts a lot of upward pressure on particularly diesel, because diesel gas and home eating oil are the exact same thing. It's not that folks are filling their tanks more often, says Gross. They're driving less. If there's less demand, why are they paying more? Well, it's because gasoline prices are a little higher. That hits some consumers harder than others. Kathy Bostjansik explains those at the upper end of the income spectrum, when you feel wealthier, you tend to spend more. And they are, because stock and home values have been soaring. By contrast, she says, middle class and lower income households are still really struggling. And they may have continued to spend, but they had to rely more on.
- [02:59]
Kyle Rysdal
Credit and draw down on their savings.
- [03:02]
Mitchell Hartman
But up and down the income spectrum, folks are still spending a lot on what they need and also on what they want. Consumers are still willing to spend as long as they have a job or good income prospects. And Buscasek says that'll continue driving strong consumer spending well into the new year. I'm Mitchell Hartman for Marketplace Wall Street.
- [03:23]
Kyle Rysdal
On this Thursday, traders gave back some of their gains from yesterday. We will have the details when we do the numbers. The winds are down in Los Angeles for now. Crews are still working on the Palisades and the Eaton fires. Those who've lost so much are trying to figure out what to do now, but the foundation's already being laid for the recovery. Over the weekend, California Governor Gavin Newsom signed an executive order that, among other things, would suspend the state's environmental regulations for people rebuilding structures lost in the fires. That is now more than 12,000 at current count. The risk of wildfires remains, though, and that's a worry for buildings still standing and those yet to be built. Kimiko Barrett is a wildfire research analyst at Headwaters Economics, where she studies, among other things, making homes more resilient. Hardening is what the fire community calls it. Kimiko, welcome to the program. Good to have you on.
- [04:40]
Mitchell Hartman
Thank you so much. I'm glad to be here.
- [04:42]
Kyle Rysdal
Let's get, let's get some definitions out of the way first. I suppose hardening one's home. What does that mean?
- [04:48]
Mitchell Hartman
Yeah, I think a better terminology for that, Kai, would be structural improvements to the home itself in order to mitigate wildfire risk.
- [04:56]
Kyle Rysdal
But that's a mouthful.
- [04:58]
Mitchell Hartman
It is.
- [05:00]
Kyle Rysdal
What does it mean in practice?
- [05:02]
Mitchell Hartman
Sure. Modifications to the home itself in terms of the building materials. In some cases, it would be the design of the home. But very often when we talk about hardening a home, it's fortifying it against increasing wildfire risk and predominantly through embercast, which ignites most homes direct flame contact or through radiant heat. So again, we're talking mostly about building materials themselves.
- [05:28]
Kyle Rysdal
All right, so look, if I want to take my home, which, granted, is old and has been around for a very long time, and harden it and it's got wood siding on it, I would have to spend, I imagine, a chunk of money to not have wood siding. Is that what you're saying?
- [05:42]
Mitchell Hartman
Well, so here's the complex, wicked crisis that we're dealing with when we think through retrofits, and that's in some degrees it can certainly be true, your statement of the cost. And in some times it can be cost prohibitive. But the alternative that is worth Noting is that in some situations there are actually very affordable and very effective risk reduction strategies. Things like EVE design, things like vent replacement. Very, very importantly, think about that 0 to 5 foot perimeter around the home itself. If you have wood mulch, the suggested replacement would be to pull that out and put rock there. So when we think about retrofitting or reducing risk to a home, it's essentially reducing that flammable surface area and opportunities for embers to ignite the structure itself.
- [06:31]
Kyle Rysdal
Not to in any way minimize the destruction and the personal tragedy of the events here in Los Angeles, but I imagine it's easier and more cost efficient to build new hardened homes than it is to retrofit the ones that are still standing.
- [06:47]
Mitchell Hartman
It is in the sense that you're swapping out building materials. So instead of using wood siding, you're going to use fiber cement siding. Or alternatively, instead of using a wood roof, you might replace it with an asphalt or a metal roof. When you're dealing with retrofit, you're dealing with such legacy issues and the conditions on the ground can vary so much that there's a significant variation. But again, some of these measures can be as cheap as 2 to $3,000 all the way. You know, over $100,000 depending on where that risk and the level of retrofit that's required.
- [07:20]
Kyle Rysdal
Right on that high end thing. Is there a financing ecosystem supporting this or am I going to have to take out a second mortgage?
- [07:27]
Mitchell Hartman
Yeah. So this is a super valid question, and it depends honestly which state you're in at the federal scale right now. There is a significant lack of investment and funding for these home hardening efforts. FEMA has a BRIC program, but less than 5% of that goes towards wildfire projects. The state of California does have a very innovative and unique leading pilot program on retrofits called the California Wildfire Mitigation Program. And they are the only state right now doing this at that level. There are smaller communities across the country that certainly help offset the costs and provide subsidies for homeowners to do these mitigation measures. But it is a big piece that's missing when you think through that financing mechanism.
- [08:10]
Kyle Rysdal
And that then makes it tough to scale and make sure that people who need it can get this kind of thing done so that they can save their homes.
- [08:16]
Mitchell Hartman
It certainly does. Yeah. And we spoke to this. I was part of the Federal Wildland Fire Mitigation and Management Commission that was established through the Biden Harris Administration. And the first recommendation was the establishment of a federal agency that could look at community wildfire risk reduction, providing dedicated investment before wildfire becomes a disaster.
- [08:38]
Kyle Rysdal
Yeah. What was the response to that recommendation?
- [08:40]
Mitchell Hartman
It's still being out there through Congress right now. We shall see. It's an area that, you know, it's not just wildfire risk. We as a society at all levels must be prepared for living with this increasing future of climate hazard and disaster. So now is the time to deliberately and thoughtfully think through what kind of future is that going to be and how do we integrate these building practices into new development and retrofits before a disaster takes place.
- [09:07]
Kyle Rysdal
Kimiko Barrett at Headwaters Economics. Thanks for your time, Kimiko. Really appreciate it. See you.
- [09:12]
Mitchell Hartman
Thank you, Kai.
- [09:13]
Kyle Rysdal
Bye bye. It's four days now until the start of the second Trump administration. And while again, we cannot know for sure what he's going to do until he does it, the president elect has made it completely clear that new tariffs are coming on all countries, perhaps on China, almost certainly. And it's a very Safe bet, given Beijing's experience in Trump won, that China's got a trade war playbook ready to go for Trump. 22 Marketplace's Justin Ho took a look inside.
- [10:08]
Mitchell Hartman
The first item in China's playbook during the previous Trump administration was pretty you hit us with tariffs, we hit you back. So it was kind of like for like, if you will. Davin Chor is a professor at Dartmouth's Tuck School of Business. He says China slapped so many retaliatory tariffs on US Exports that it's running out of exports to target. But even if that strategy isn't as useful for China now, they're not going to sit idly on their hands and allow themselves to be hit by tariffs and give up on the US Market. There are alternative ways in which they can get that product to the US this brings us to the second item in China's playbook, sneaking around US Tariffs. Chor has studied how over the last few years, Chinese manufacturers have moved production to Mexico and Vietnam, which have lower trade barriers with the U.S. in fact, chor says Chinese investment in Mexican manufacturing grew fivefold between 2017 and 2022. They're trying to make sure that they hire enough Mexican labor, Mexican inputs from local suppliers, and continuing potentially to have a way to tap into the US Market. Chor says the US could try to stop those flows of goods. President Trump has said he plans to impose new tariffs on all imports from Mexico. Katie Russ, an economics professor at UC Davis, says the US Government could also try to limit imports of specific goods, including electronics or auto parts made with Chinese investment by stepping up what are known as rules of origin, which are rules that regulate the third country content of goods coming to the United States from a trading partner like Mexico. But Russ says if the US Cracks down on these indirect Chinese exports, Chinese companies could just start investing in other countries in South America or in Europe. That's the game of whack a mole right there. It's really hard to cut off all of those channels. China also has plenty of other moves in its playbook that it's been using more recently. Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, says China has started to restrict exports of critical minerals that American manufacturers rely on gallium and germanium, which go into semiconductors, and graphite, which is a crucial input into batteries. Chorzenpa says China could also complicate things for US Companies that operate within China. For instance, he says China can use its own antitrust laws to make it harder for American companies to do mergers if they have a big presence in the Chinese market. One of the latest rounds of retaliation included an investigation into Nvidia, which had a merger a few years ago that China approved, and they're now saying we're looking at violations there. Chorzempa says there are a few reasons why China might not want to go too far. He says escalating the trade war can make it more difficult for China to attract foreign investment. Plus, China relies on exports to fuel its economy at a time when consumer spending in China is weak. But Barry Eichengreen, an economics professor at UC Berkeley, says China is also realizing that it should probably start working on making its economy less vulnerable to tariffs. As a result, they are committed, I think, to shifting away from exports and toward more domestic spending, more consumption spending. In the short run, Eichengreen says China will still try to push back against the U.S. using all those other items in its playbook, because reorienting its economy to be powered by consumer spending instead of exports isn't going to happen overnight. They have to boost household incomes, and that takes years. They have to increase social spending, build a social safety net so people no longer feel compelled to save for a rainy day. But if China can pull this off in the long run, the country could have an even stronger position against the US since trade tensions just won't matter as much. I'm Justin Ho for Marketplace.
- [14:19]
Kyle Rysdal
Coming up.
- [14:20]
Mitchell Hartman
I needed to be more proactive rather than going into action. When a natural disaster happens, sometimes you.
- [14:27]
Kyle Rysdal
Gotta live it to learn the lesson. But first, let's do the numbers. Dow Industrials off 68 points today about 2. 10% 43,153 the Nasdaq down 172. 9. 10% 19,003 3. 8. 8 the S&P 500 off 12 2. 10% 5937 following up on Mitchell's story of retail sales, TJX Company's parent company of Marshalls and TJ Maxx and some others gained 1.9% today. Walmart and Ross were both essentially unchanged. Amazon subtracted 1.2%. Sales of electric and hybrid vehicles made up 20% of all U.S. car sales last year. That's according to the data firm Motor Intelligence. It's also a record market share. Tesla, though, decelerated 3.4% to date. General Motors revved up 3. 10%. Ford added about 6. 10%. Bonds up yield on the 10 year t note down 4.61% you're listening to Marketplace.
- [15:30]
Mitchell Hartman
Hi, this is Mayumi from Long Beach, California. I love Marketplace and Kai. He really does a great job delivering important content that I benefit from. So I donated because it just seems like the natural thing to do. Join me by making a gift Marketplace today@Marketplace.org donate.
- [15:58]
Kyle Rysdal
This is Marketplace. I'm Kai Rysdal. We ended the program yesterday, you might recall, with the Fed's beige book, its eight times a year snapshot of this economy from each of the regional Federal reserve banks. It's 53 anecdote filled pages of economic goodness. Several Fed districts San Francisco, Richmond and Dallas among them said companies are having a tough time finding skilled workers or worry about being able to find them in the future. At the same time, though, and as you know, we've been hearing for months about workers feeling stuck in their jobs and that they can't find open positions, which is, you know, confusing. Marketplace's Kaylee Wells dug into it.
- [16:38]
Mitchell Hartman
It is possible to have both of those problems at once. Senior U.S. economist Josh Hurt of Vanguard says that's what happens when skills are mismatched and one new development is making the problem worse.
- [16:49]
Kyle Rysdal
AI would rise to us as a.
- [16:52]
Mitchell Hartman
Pretty leading cause where you're getting some pretty rapid change, meaning the skills workers have aren't the skills employers are looking for. Babson College professor Tom Davenport, who focuses on artificial intelligence, says that' true, especially in the tech sector, employers need to get much more serious about training people to use AI effectively and to build AI. But solving that mismatch will take time to fix. The labor market is strong right now for many sectors, but it has shown signs of slowing down. George Washington University economics professor Tara Sinclair says although employers are concerned at the moment about finding the right kind of skilled workers, it's low wage laborers that are actually more vulnerable. As the economy cools, people in the higher education brackets tend to see their unemployment rate change by less than people at the lower, lower end of the wage and education distributions. And Sinclair doesn't see employers complaints resolving anytime soon. We have long faced challenges in terms of the types of jobs that people want and that people are trained to do are quite different from the jobs that employers are wanting to hire for. So the tech industry and AI are getting the attention this time around. But Guy Berger says it's bigger than that. Employers like to complain about the difficulty of finding skilled workers, like all the time. He directs economic research at the Burning Glass Institute, and he says beige books a decade old would reveal the same problem. Employers always love to have the unicorn of paying less for a highly skilled worker, and so it's just a part of griping, berger says. Some of the griping isn't even a bad thing. Sometimes it's just a sign of a healthy labor market. I'm Kaylee Wells for Marketplace.
- [19:05]
Kyle Rysdal
Not that it's any of my business, but are you one of those who leaves the lights on when you leave a room, or do you make sure you turn it off? Asking obviously for the planet one light bulb at a time really adds up. But also for your electricity bill, they are expensive enough as it is, right? But it turns out wholesale electricity prices were lower last year than they were in 2023. That's according to some new analysis from the Energy Information Administration. Those prices were also less volatile than they'd been over the past few years. Marketplace Samantha Fields has that one.
- [19:39]
Mitchell Hartman
When you get your electric bill every month, do you just check how much you owe and pay it, or do you really look at it? Mark Morey at the Energy Information Administration says if you do really look, you should see an itemized list. There's a connection charge, there's a distribution charge, and then there's a charge for the amount of electric you are actually using in your home. That last charge is the part of your bill that's affected by wholesale electricity prices. And Morey says if those prices drop.
- [20:07]
Kyle Rysdal
Ideally that cost for the actual energy.
- [20:11]
Mitchell Hartman
You'Re using should be lower. But Katie Housman at the University of Michigan says that doesn't necessarily mean your actual bill will be lower. We also all pay a fair amount for things like new transmission or new distribution infrastructure and costs in a Lot of the country are not falling for those other components of our bills. Wholesale electricity prices fell last year on average for a couple of reasons. Natural gas prices were low, and a lot more solar and wind power got connected to the grid. And they produce energy at a very low cost. But Amy Myers Jaffe at NYU says other costs utilities pay have been rising in many places. So if you're in California and they had a very transmission lines and distribution lines because of fires, that's very expensive. And a lot of that expense is getting passed on to you. Another expense, utilities often pass on the cost of building all those new wind and solar projects. But Christopher Knittle at MIT's Sloan School of Management says that at least is getting cheaper. When President Carter passed away, one of the things that President Carter was known for was putting solar panels on the White House. So I went back and looked at the data on the cost of building solar in 1979 relative to today, and the costs have fallen by 99%. The costs of building wind and battery storage have come way down, too. And he says as all those costs continue to fall, hopefully eventually our electric bills will too. I'm Samantha Fields for Marketplace.
- [22:06]
Kyle Rysdal
These fires here in Los Angeles, as destructive and deadly as they have been, have happened before in California and a lot of other places. And all of those communities and the small businesses in them have had to figure out how to go on, how to rebuild, how to restock, and how to pay for it.
- [22:25]
Mitchell Hartman
My name is Sonya McMorin. I own a gift shop called Homework in Santa Cruz, California. So the last one and a half years has definitely still had its ups and downs. We're still having our kooky weather events. We had a tornado. We had a big storm surge that took out one of the wharfs here in the city. But otherwise it feels manageable. And people are coming back and coming back and visiting Santa Cruz, which feels really good. So since the CZU fire and seeing what's going on down in Southern California has really made me realize that I needed to be more proactive rather than going into action when a natural disaster happens. So one of the things that I've been wanting to do is to be more current in what our assets are within our store. So most retail businesses do inventory counts once a year. I've decided that we're going to be doing them twice a year, maybe even quarterly, so that I have the most current data of what inventory and assets I have in the store and also doing what has been suggested for residents, but doing it for my business, which is photographing and taking video of the interior of my business so that if a natural disaster happens, I'm ready for whatever their insurance company needs in order to provide me with my reimbursements. One of the benefits that Homework has is that it's in an old bank building. It's a historic 1920s building. And not only that, but we're above sea level, which a lot of places in Santa Cruz aren't. And so that's been top of my mind, especially since I'm, you know, in the middle of lease negotiations and trying to figure out do I want to continue paying a high rent for where I am or do I want to go somewhere else. And really I'm kind of leaning towards staying just because of the safety of my building should something happen. I think Santa Cruz is such a resilient community and it's one that really supports its local small businesses. And it's been wonderful to see not only our community rally around our small businesses, but also the small business community is really supportive of each other. And so it's been really nice to continue seeing relationships grow between businesses and the support grow so that we can continue thriving.
- [25:20]
Kyle Rysdal
Sonya McMorran homework is her store. Santa Cruz, California is her place. The CZU fires back in 2020 were the disaster. This final note on the way out today. I mentioned this in passing yesterday in the numbers, but it's worth coming back to, I think just as an indicator of where the markets are versus where the Federal Reserve is. Freddie Mac, the big government sponsored mortgage conglomerate said today the average rate on a 30 year fixed home loan in this economy this week is 7.0. That's the fifth week in a row it's gone up, the highest it's been since last May. You'll have noticed, I hope that bond yields are up too. Even though the Fed is talking rate cuts, the subtext here is worries about what the economic policies of Trump too might mean for inflation. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Pietra and Stephanie Sikh are the Marketplace editing staff. Amir Bibawe is the managing editor and I'm Kyle Rysdal. We will see you tomorrow. Everybody, this is 8:00pm.
- [26:45]
Mitchell Hartman
Hi, this is Nicole from Camp Hill, Pennsylvania. I'm always surprised how much Content Marketplace can pack into 30 minutes. Listening is part of my daily routine. I love the way they make the content digestible and relatable. For us folks who don't have a strong background in economics or business, join me by making a gift to Marketplace today@Marketplace.org donate.